Board the Ark

Cathie Wood's sophomore slump

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Board the Ark:

Ark Invest, led by Cathie Wood, has had its struggles this year following an unbelievable run in 2020. Ark currently has 6 Active ETFs and 2 Index ETFs whose assets under management (AUM) grew from $3.1 billion at the end of 2019 to an impressive $34.5 billion by the end of 2020. They’re also planning to launch a new transparency index ETF (CTRU) this upcoming week.

Cathie Wood’s flagship fund ARKK, the innovation ETF, had a breakout year in 2020 and currently accounts for about half of the firm’s AUM. At the end of 2019, ARKK had $1.86B AUM and by the end of 2020 it had $17.68B AUM. Two months later, the assets peaked at an astonishing $27.90B and are currently trading down in the $16B range again.

If you take a look at the individual names inside of ARKK, it is pain squared. As @PensionCraft notes below, all but 4 stocks in the fund are experiencing more than a 20% drawdown. This underperformance places ARKK among the worst-performing mid-cap growth funds for the year to date, according to Morningstar.

In fact, every one of Ark’s active ETFs peaked in February except for the Space Exploration & Innovation ETF (ARKX) which was launched on 3/30/21.

If we take a closer look at the 2021 performance, you can see they all peaked in February and only 2 of Ark’s 8 ETFs are currently positive YTD while the S&P 500 sits on a 20.8% gain.

Below is a chart showing the percentage off of the highs from all of the Ark ETFs. As you can see, every ETF except the Space Exploration & Innovation ETF is currently in a bear market—defined as down more than 20% from the highs.

Wood spoke to CNBC this week and kept her conviction in Ark’s strategies, which focus on “disruptive innovation” in five digital plaforms: DNA sequencing, robotics, energy storage, artificial intelligence and blockchain technology.

Wood said her strategies are set to quadruple over the next five years, after their underperformance this year.

The portfolio manager expects the next few years to bring the “most spectacular period for innovation that we have ever seen,” said Wood.

With growth and momentum stocks in the dumps, it may be time to finally board Cathie’s Ark. This drawdown has definitely caught my attention.

Market and Performance Update:

Now let’s see how the People’s Portfolio did this week…

The market continued to be extremely volatile this week. It seemed like omicron headlines continued to drive the market throughout the week as the U.S. recorded multiple cases in different states.

Meanwhile, Powell surprised markets earlier in the week by altering his previously consistent tone on inflation, telling U.S. lawmakers that “it’s probably a good time to retire that word (transitory) and try to explain more clearly what we mean.” Team Transitory took the L.

The jobs report came out Friday and was mostly disappointing:

  • Nonfarm payrolls increased by 210,000 in November, following a gain of 546,000 the previous month.

  • The number was well below Wall Street expectations of 573,000.

  • Despite the big hiring miss, the unemployment rate fell to 4.2%, a 0.4% percentage point decline that came even with rising labor force participation.

  • Professional and business services and transportation and warehousing led gains, while hiring in leisure and hospitality was sluggish and retail lost jobs despite the traditional holiday hiring season.

On Friday, we voted Waste Management (WM) to remain in the portfolio for the rest of the year. Barring some exogenous news event, I expect to keep most of the gains on this holding. It’s been steady up and to the right nearly the entire year.

Exxon Mobil (XOM) is on the chopping block next week for the 4th time. We’re currently holding onto a -0.08% unrealized gain over the past 39 weeks. The stock is up nearly 50% YTD, even after dropping more than 10% off the recent highs. Unfortunately, we didn’t get long until Week 9 so we missed out on part of the run up in the first quarter of the year.

Keep an eye out for the new Twitter poll every Friday. Follow along in real-time with nearly 300,000 others on Public.

Portfolio News Highlights:

The biggest stories affecting our portfolio this week:

  • Square Stock Changes Name To Block, Joins Facebook In Corporate Rebranding (IBD)

  • Growth Stock Meltdown: ROKU and PYPL vs. NVDA and TTD (Zacks)

  • Stocks drop as the U.S. reports its first case of the Omicron variant (Yahoo)

What Else We’re Reading:


  1. Delivering on Price Execution Without PFOF - Stephen Sikes (Public Blog)

  2. Assured Misery - Morgan Housel (Collab Fund)

  3. The Ethics of an Arms Race - Trae Stephens (Medium)

  4. Ships in California logjam now stuck off Mexico, Taiwan and Japan - Greg Miller (Freight Waves)

  5. Twitter Is About to Get Way Worse - Mike Solana (Pirate Wires)


Need new reading material? Visit my Amazon page for my most purchased book recommendations.

Tweets of the Week: